The Cabinet Committee on Economic Affairs at its meeting today approved the minimum support price (MSP) of 14 Kharif (summer-sown) crops. The MSP of paddy (common grade) has been increased by Rs 200 to Rs 1,750 per quintal, while that of Grade A variety by Rs 160 per quintal to Rs 1,750.
The MSP of paddy (common) was Rs 1,550 per quintal and Rs 1,590 per quintal for paddy (grade A) variety. Hike in paddy MSP will increase the food subsidy bill by over Rs 11,000 crore based on procurement figure of the 2016-17 marketing year (October-September).
The MSP of cotton (medium staple) has been increased to Rs 5,150 from Rs 4,020 and that of cotton (long staple) to Rs 5,450 from 4,320 per quintal. In pulses, tur MSP has been raised to Rs 5,675 per quintal from Rs 5,450, and that of moong to Rs 6,975 per quintal from Rs 5,575. Urad MSP has been hiked to Rs 5,600 from Rs 5,400 per quintal.
This year in February, the government had announced that the MSP of 14 notified kharif crops will be fixed at least 1.5 times higher than the production cost.
On Tuesday, Prime Minister Narendra Modi had met Agriculture Minister Radha Mohan Singh and officials of planning body Niti Ayog to give final shape to the long promised move of providing at least 1.5 times of the production cost to the farmers.
Prime Minister Modi also discussed about the financial implication of the proposed procurement mechanism -- to ensure that farmers get MSP -- if market prices fall below the government's benchmark rate. According to reports, senior officials of Niti Aayog made a presentation before the Prime Minister on the proposed procurement mechanism and its financial implication.
Niti Aayog has proposed that the states should be given the option of three models -- Market Assurance Scheme (MAS), Price Deficiency Procurement Scheme (PDPS) and Private Procurement and Stockists Scheme. Reports suggest that the Centre may have to bear Rs 12,000-15,000 crore annually to compensate farmers in case prices fall below the MSP in all crops except rice and wheat which are already being procured by state-run Food Corporation of India.
According to the Niti Aayog's proposal, MAS will be implemented by state governments which will enter the market depending on the local conditions and procure through their own state agencies or any other private agency authorised by states. States will be responsible for procurement and liquidation of the procured commodity. The Centre will compensate the operational loss.
On the other hand, the Price Deficiency Procurement Scheme has been designed similar to the Bhavantar Bhugtan Yojana launched by the Madhya Pradesh government. Under this policy, farmers would be compensated the difference between the MSP and actual price subject to certain conditions and ceiling in case the sale price is below the model price.
Niti Aayog has also proposed engagement of the private sector in MSP-linked procurement through a transparent e-market platform. States would be allowed to empanel private firms via transparent bidding for purchase of farm produce when prices fall below the MSP.
In his Budget 2018 speech, then Finance Minister Arun Jaitley had announced that Niti Aayog in consultation with central and state governments will put in place a fool-proof mechanism to ensure farmers get benefit of the minimum support price. The government wants to finalise these schemes and announce them before the harvesting of kharif crops that begins from October onwards.
(With inputs from PTI)